IRS outlines ACA tax provisions for small employers

Several provisions of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) apply only to small employers with less than 50 employees. The IRS recently released a tax tip, which outlines the following tax considerations:
• More than 95 percent of employers have fewer than 50 full-time employees or equivalents and are not subject to the employer shared responsibility provision (Section 1513 of the ACA).
• Calculating the number of employees is important for employers that have close to 50 employees or whose workforce fluctuates throughout the year.
• Employers with 50 or fewer employees can purchase health insurance coverage for employees through the Small Business Health Options Program (SHOP; Section 1311 of the ACA).
• Employers that have fewer than 25 full-time equivalent employees with average annual wages of less than $50,000 may be eligible for the small business health care tax credit (Section 1421(a) of the ACA). These employers are eligible for this credit if they cover at least 50 percent of their full-time employees’ premium costs, and the coverage is purchased through the SHOP.

The IRS also noted that all employers that provide self-insured health coverage must annually file information returns for plan participants. The cost of health care benefits will be reported in box 12 of the Form W-2, with Code DD to identify the amount. According to the IRS, the amount reported should include both the portion paid by the employer and the portion paid by the employee. However, in Notice 2011-28, the IRS has provided relief for smaller employers (those filing fewer than 250 W-2 forms) by making this requirement optional for them until further guidance is issued.